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Editors --- "Flynn and Others as trustees of the Groote Eylandt Aboriginal Trust v. Mamarika And Others as representatives of the Umbakumba community - Case Summary" [1996] AUIndigLawRpr 83; (1996) 1(4) Australian Indigenous Law Reporter 611


Flynn and Others as trustees of the Groote Eylandt Aboriginal Trust v. Mamarika And Others as representatives of the Umbakumba community,

Blitner and Others as representatives of the Angurugu community

Wurramarrba And Others as representatives of the Bickerton island community

And The Attorney-General For The Northern Territory Of Australia

Supreme Court of the Northern Territory of Australia (Martin CJ)

20 March 1996, Darwin

Aborigines and Torres Strait Islanders - Charitable trusts - Interpretation of a trust instrument - Whether current applications of trust monies are permissible under the trust instrument - Whether current applications are for a charitable purpose.

On 28 August 1969 the Groote Eylandt Aboriginal Trust Inc. was incorporated to act as a trustee of the Groote Eylandt Aboriginal Trust (GEAT). The trustee has since received all royalty payments from the Groote Eylandt Mining Company Ltd (GEMCO), a subsidiary of BHP. GEMCO makes the royalty payments from profits earned from its manganese mine established in 1965 on the western side of Groote Eylandt. The Court was requested to decide whether past applications of trust funds by the trustees were permissible under the trust instrument.

Held:

1. The trust is a charitable trust.

2. The trustee has a duty to apply the trust funds for charitable purposes.

3. The funds are only to be used in such a way as will benefit the community as a whole. Use of trust funds for the benefit of a particular person or persons, which is not beneficial to the community, will be in breach of the trust.

4. When delegating duties or powers according to the trust deed, the trustee is under an obligation to be diligent in seeing that a duty given to an agent has been properly performed.

Martin C.J

In this matter the Court is asked to determine questions arising in the execution of a certain trust. The determinations are very important not only for the plaintiffs, the current trustees, and any who may replace them, but for practically the whole of the Aboriginal population of Groote Islandt and Bickerton Island which lie in the Gulf of Carpenteria, not far from the eastern edge of the mainland of the Northern Territory. The Court has been requested to produce, by way of reasons and directions, a document which can be readily referred to and understood by all concerned. Bearing in mind that the law which must be applied is mainly the common law evolved over time in a society quite foreign to that of the Aboriginals, and my lack of instruction in concepts in Aboriginal society that may have a relationship to the relevant common law, my attempt to meet the wishes of the people, within the constraints of judicial duty, may not be as successful as they may have hoped. However, I have attempted to proceed by way of straight forward statements of the law, and how it ought to be applied in these particular circumstances. I have read all the background material supplied to me by counsel for all parties and considered the many cases and extracts from the standard texts put before the Court in argument by them. I consider that I am relieved of any requirement to analyse and discuss the relevant authorities, since there is no sufficient area of doubt to warrant it. There is as well a degree of urgency in dealing with this case arising from difficulties within the community pending resolution to the questions which arise, and the need to provide determination of the questions so that the present trustees can set about the application of trust funds which have for many years past supplied a significant source of community sustenance and purchasing power.

...

The Trust Deed

Pursuant to a Deed having affect from 25 May 1956, Church Missionary Society Trust Limited ('the Settlor') established a trust fund for what were called 'Royalty' payments received and to be received by it, and appointed Groote Eylandt Aboriginal Trust Incorporated ('the Trustee') to administer the fund. The fund has been supplemented by further funds in the intervening years and the Trustee has accepted the same as additions to the trust fund.

Recently, the Trustee was removed and the plaintiffs were appointed as trustees of the trust fund. It is anticipated that the Trustee may be restored to the position as trustee of the fund.

The terms of the Deed oblige the trustee (I use that term to cover whosoever fills that role whether one or more than one), to hold and apply the trust fund, including the additional funds accepted as additions to the trust fund:

' exclusively

' for such charitable purposes (in the strict legal sense)

' as may be served by the provision of money, property or other advantages

' for the benefit, welfare and advancement

' for all aboriginal persons who are permanently resident on Groote Eylandt or Bickerton Island

' and who are members of any of twelve clans identified by name in the Deed (para. 4).

Without limiting those purposes, the purposes of the trust include the use of the trust fund and all other payments and donations for the:

' education

' benefit

' welfare

' comfort, and

' general advancement in life of those Aboriginal persons in such manner and to such extent and upon such terms and conditions as from time to time may seem expedient to the Trustee (para. 4(b)).

There are a variety of powers of investment of the funds of the trust conferred by the Deed, including, by way of unsecured loans to a person who is one of the Aboriginal persons described (para. 5(vi)). That power is limited by a requirement that not less than half of all Royalty payments be invested in other forms of prescribed investment.

The Directions Sought

The plaintiffs seek directions pursuant to r. 54.02 of the Supreme Court Rules as to:

' 1. Whether the Trustees of the Groote Eylandt Aboriginal Trust ('GEAT') are entitled to make distributions or grants of money to Clan groups or family groups:

(a) without the imposition of conditions; and/or

(b) supervision by the Trustees as to the expenditure of the money.

2. If the Trustees are required to impose conditions upon, and/or supervise distributions or grants, what:

(a) types of conditions are required to be imposed; and

(b) level of supervision is required.

3. Whether, and under what conditions, the Trustees of GEAT are entitled to make loans to the objects of the Trust.

4. Which, if any, of the following expenditures can be lawfully classified as being of a charitable nature for the purposes of the Groote Eylandt Aboriginal Trust:

(a) grants for medical purposes;

(b) grants for funeral expenses;

(c) grants to the churches;

(d) grants for the aged and handicapped;

(e) grants for educational purposes;

(f) grants for the payment of electricity;

(g) grants for sport and recreational purposes;

(h) grants for local festivals;

(i) unconditional clan grants.



What are the principles to be applied by the Trustees in the allocation of Trust funds between the various charitable purposes available pursuant to Clause 4 of the Trust Deed.'

These directions are sought bearing in mind an assessment made by the plaintiffs as to the nature of certain payments made by the Trustee of the kind referred to and the manner of payment of them. The Trustee is not a party to these proceedings, and whether the payments for the purposes suggested were made, and whether in the manner suggested, has not been the subject of any determination. However, the Court is satisfied that the trustees are genuinely desirous of obtaining guidance as to those matters for their own purposes and because questions of a like nature have arisen amongst the Aboriginal persons referred to in the Trust Deed.

Construction of the Trust Deed

Most of the cases to which the Court was referred deal with the question of whether a particular bequest or settlement created a charitable trust. Here there can be no doubt about that. What is in question is the purposes for which the trust fund may be applied so as not to breach the duty of the trustee to apply them for charitable purposes.

The trust is a charitable trust. The express words at para. 4 of the Deed make it so. What are charitable purposes are to be decided in the strict legal sense, as opposed to popular notions of what may be a charity or of a charitable nature. Guidance as to what may properly be regarded as charitable purposes may be gleaned from the preamble to the famous 1601 Statute of Queen Elizabeth I and the indications contained therein. Reported cases may afford a guide by way of analogy. For the most part it is a matter of judgment. As a great many of the purposes referred to in the preamble of the Statute are not relevant in this case, I will not trouble to set them out in full.

In current usage, a charitable trust, in the strict legal sense, is one for:

The relief of poverty. This is not confined to relief of destitution by providing the necessities of life. It relates as well to the relieving of distress caused by lack of money, that is, of those who would otherwise go short or without. Regard should be had to an acceptable minimum standard of living that is appropriate to the community. Gifts of cash to those in poverty to relieve need and distress fall within the purpose, unless it is shown that it does not have that affect.

Advancement of education. This is commonly regarded as the process by which persons, usually children and young adults, develop or have developed their intellectual, emotional, spiritual and physical powers and so become full participating and productive members of the community.

Advancement of religion. This includes the maintenance and spread of religious doctrine, the provision of facilities for worship and the support of persons who conduct worship or propagate religious teachings. A gift to a church is prima facie charitable, but must be exclusively for a charitable purpose and not include any non-charitable purpose.

Other purposes beneficial to the community and not falling into any of those particular categories. These may relevantly include the following:

' Relief of the disabled through whatever cause and including action directed to the cure of alcoholism and drug addicts.

' Relief of the aged involving the application of funds for the relief of disabilities associated with the aged, whether in poverty or not.

' Advancement of Aboriginal culture involving the preservation, advancement and maintenance of traditional Aboriginal culture (including spiritual beliefs) and way of life of the community. It may be that this category is subsumed in or analogous to some other or others of the recognised categories, but in this case it is necessary to make it plain that having taken into account all the information before me, it assumes a distinct charitable purpose on its own account.

Charitable trusts exist for the benefit of the public or a section of the public as understood in accordance with the law. The section of the public defined in the Trust Deed, being the Aboriginal persons referred to, is a section of the public for these purposes. (That section of the public is referred to as 'the community'). The reference in para. 4 to the purposes of the trust as including the use of the trust fund for the education, benefit, welfare, comfort and general advancement in life of the community, is subject to the requirement that the trust funds be applied for charitable purposes. The funds are only to be used in such a way as will benefit the community as a whole. Use of the trust funds xfor the benefit of a particular Aboriginal person or persons (falling within the description contained within the Trust Deed), which is not beneficial to the community, will be in breach of the terms of the trust. Those particular enumerated purposes do not extend or override the primary and only purposes of the trust, that is, charitable purposes; they are examples of the way in which the trust funds might be used, provided always that every such use of those funds falls within what is a charitable purpose in the strict legal sense.

Duties of a trustee

The principle duties of a trustee in this case are:

1. To acquaint himself with the terms of the trust deed.

2. To execute the trust in accordance with its terms and the general law so as to benefit the community. In the course of doing so it is permissible that members of the community share in the benefits through effect being given to a purpose to which the trust is directed.

3. To protect the trust property.

4. To exercise discretionary power in good faith, upon real and genuine consideration and in accordance with the purpose for which the discretion was conferred.

5. Not to delegate any of the trustees powers or discretions to any person unless in accordance with the provisions of the trust Deed.

6. Not to invest the trust funds in any manner which is not authorised by the trust Deed or statute.

7. Not to deal with the trust property for his own benefit, or otherwise to profit from the trust.

There are numerous provisions in the Trust Deed and in the general law relating to the powers, discretions and duties of trustees. The Trust Deed contains provisions regarding liability of the trustee for errors, forgetfulness, breach of duty or trust and arising from the exercise of discretions. These directions are given without regard to the possible application of those provisions.

Execution of the Trust

It is fundamental to the concept of a charitable trust that it be for a purpose not a person, and that must be kept steadily in mind by the trustee at all times. It would be a breach of trust for any of the trust funds to be paid to any person or persons within the community having the only affect of increasing the property of that person or persons. It is inconsistent with the notion of a charitable trust that payment be made out of the trust fund to a person for no reason other than that he or she is one of the community for whose benefit the trust was established. Any such payment must be for a charitable purpose, for the benefit of the community, not just the person who receives the money. For the same reasons, the trustee would be failing in a duty to properly discharge the obligations placed upon them by the Trust Deed if they simply paid money to a person who intended to distribute it, or a portion of it, amongst other members of the community for no charitable purpose. Payment of money to a person, either directly or through another, without the object of achieving a charitable purpose would be a breach of the trust. Conferring a benefit on an individual or individuals within the community by providing money out of the trust funds for any use to which that individual or individuals may think fit to use it, is not to apply the funds for a charitable purpose.

Delegation

The trustee is responsible for deciding:

' what payments are to be made out of the trust fund

' for what charitable purpose they are to be made by what means and to whom the funds are to be paid for that purpose.

There are limited powers of delegation contained within the Trust Deed as follows:

' 9. The Trustee shall not be bound in any case to act personally but shall be at full liberty to employ any agents, consultants, advisors, servants or other persons whatsoever to transact all or any business of whatever nature required to be done in the premises including the receipt and payment of money; and the Trustees shall decide the remuneration to be allowed and paid and all charges and expenses so incurred.

10. The Trustees if at any time they are more than one shall act jointly but they may in writing delegate to any person or persons (including any Trustee) the exercise of all or any of the power or discretionary authorities hereby conferred on the Trustees, and may execute any powers of attorney or other instruments necessary to effectuate such purpose.

11. The Trustee may delegate to committees of three or more persons (at least one of whom shall be a member of its Committee of Management), who shall have power to regulate and control their own proceedings some or all of its powers, discretions and authorities but who shall be at all times under the control of the Trustee and whose appointment may at any time be terminated by the Trustee. Such Committees shall keep minutes of all decisions.'

At common law the general rule is that a trustee must not delegate his duties or powers, not even to his co-trustees, but the delegation is allowed where it is specifically permitted by the trust instrument or by statute.

Paragraph 9 of the Trust Deed is limited to the appointment by the Trustee of agents to do ministerial acts. It is only that body, acting as trustee, which may exercise the powers contained in para. 11 which relate to the delegation of powers, discretions and authorities. Para. 10 applies where there is more than one trustee, such as the plaintiffs.

In the case of an appointment of an agent to perform an act, as opposed to exercising a discretion, the trustee must act in conformity with common usage and as prudently as if acting for himself, and provided further that the agent is employed in a matter which is within the ordinary scope of the agent's business to perform. A trustee is under an obligation to be diligent in seeing that a duty given to an agent has been properly performed. There are provisions in the Trustee Act granting power to trustees to appoint bankers and solicitors as agents for particular purposes.

The express provisions in the trust deed authorising the delegation of the exercise of discretionary powers does not relieve the trustee of the duty of exercising the care of a prudent man of business in the appointment and in the supervision of the delegate.

Whilst dealing with this question of delegation and agency, although it does not strictly arise in these proceedings, it is nevertheless convenient to mention the possibility that the payment of trust funds to a person for other than charitable purposes may result in that person being responsible to the community. Where an agent, with notice of a trust, deals with trust money or property coming into his hands in a manner or for purposes inconsistent with the trust, or is otherwise a party to the commission of a breach of trust, he is liable to the beneficiary in respect of money or property so dealt with, or for such breach of trust.

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